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Mr. Dani Rodrik,
I would agree to the trade off in term of good inequality and bad inequality; but the interruption of the frozen low interest rate and the unsustainable balance without fit in of the affordability margin can sabotage the mobility of the middle class largely 40% in climbing the ladder on growth to maintain the balance of all classes. This is all jobs for interchange to promote oneself and provide opportunity for advancement. Now, what is available is only in McDonalds and Starbucks; and city jobs like policeman and fireman are not refillable based on their up scaled salary like $100,000 a year or $500,000 educator never teach. It is why the cities are facing the crisis to its pension payoff; and I called it Detroit syndrome.
Perhaps, we, economists should bear in mind that moral does apply to science like economic to fit in and balance for sake of harmony and healthy outcome. This is a standard does not depend, we affirm.
May the Buddha bless you?

Gamesmsith94134: Free-Trade Blinders
Njweatherdon,
“The experiment is based on somewhat of a false premise, because it speaks to an American audience where the lower class is currently the one facing the most challenges from free trade.”
Since I do not have the figures to knick around, and I would explain Dani Rodrik’s experiment for its natural scientific reasoning like ones I wrote above my paradigm on the wealth circuitry in economical and social growth that supports and balances both accumulated wealth and consumable wealth; and it created a “Z” shaped financial development running both on the diminishing demand and diminishing return; which is based on the assumption, the route above the standard of living equal in length with the one below the standard of living is in agreement of its living standard to sustain a viable growth; and Societal changes due to the democracy on globalization. In assimilation, the shift of wealth circuitry make the redistribution of wealth from the developed nations, like US, EU, to the emerging market nations like China, India or Brazil. It would show how the wealth circuitry globally settling the living standard inequality to balance itself through the diminishing return as in welfare states or communistic position, and the diminishing demand as in capitalistic position when each maximized it top or bottom setting to its extreme. Since the ladder of growth with those defined the value and price expanded and extended its living standards in either ways, it develops a newer term of demand or supply to shift the advancement of living standard after inflation or deflation.
Perhaps, it is observable that American turned welfare state that its economy turn anemic with some 1% loaded with wealth and 99% struggle to strive above the living standard that held itself to a diminishing demand. In reverse, the diminishing return states like communistic China benefits its labors after the globalization; their living standard rose after 20% increased salary and so is the demands of goods internally and externally. Now, Asian purchased 50% of the luxury good EU produced. Then, it is how the Capitalist turns communist, and communist turns capitalist; as much of the inequality of the living standard of the two combined to merge, the expansion of the global economy may reverse itself that a cycle of accumulated wealth circuitry is completed and the standard of living is moving with the strength of the frequency of the flow of wealth that is kept in it wealth accumulated circuitry in a long run. Perhaps, it is not “The question of who wins and who loses is always important, but it's not always the educated and wealthy who win in free trade and it's not always the poor who lose in free trade. All those manufacturing jobs going overseas?” as you said when these inequality living standard make the world goes around with globalization and free trade.
In conclusion, there are deficiencies of both capitalism and communism in handling the accumulated wealth because of the agency and structure in societal developments due to a fact of the productivity model that each bounded to a death end for either a diminishing return or diminishing demand. We may always laugh at the communists for it insufficient supply; but if we understand better of our recession to depression for its lack of demand too. It is not the dogma that kept its economy stood still, but the accumulated wealth makes the world goes around. Perhaps, democracy and free trade is the motion of the cash flows in politics for its populace and they do affect nations of wealth globally. To-day, topsy-turvy is the diminishing return and diminishing demand are marginally reversing themselves when the all living standard merging themselves in creating the globalization and democracy setting in motion to make fee trade in balancing the outcome. When I ask why should US dominate the higher profitable in trading the high tech if it aborts its blue collars workers, or did it turn itself into welfare state by giving the rich ones another break? If US is not attempt to make its appropriate living standard for its people in lesser welfare state, the globalization and democracy will downgrade its status as developed nation to underdeveloped whether it will sustain its free trade environment or not. God bless America.
“But democracies owe themselves a proper debate, so that they make such choices consciously and deliberately. Fetishizing globalization simply because it expands the economic pie is the surest way to delegitimize it in the long run.” Said Dani Rodrik.
And, may the Buddha bless you too?

Discussing equality/inequality at present is pure philosophy.
We simply do not have the coordinate system to know what and how to measure.

The reason is that our present paradigm is completely unnatural.
We created a bubble based on inflated, artificial desires provided by marketing and social pressure.
People are "craving", chasing, consuming goods, pleasures they would normally not even look at. They have to work extra and pay with means they do not have.
Thus creates a completely abnormal, artificial picture.

We could only return to measure equality and inequality if we returned to a lifestyle that is based on natural necessities, natural desires and available means.
Equality in such a system would still produce a varied, multi-layered society, with "rich" and "poor".
this is because we all have very different necessities, desires, willingness to sacrifice to achieve more, we all have different talents, capabilities.

But if we created an ideal society which remains within natural necessities and natural means people could contribute to the collective with 100% of their abilities and would receive 100% of their natural necessities.

Thus such society would still look externally "unequal", but internally it would be "equal" since everybody is capable of giving everything they want to give and in return receive everything they need keep each and every person content.

Kuznet's inverted U-Hypothesis. While it focuses on the relationship between economics growth and decreasing inequality, the inverse might be true as well. Modern economists have long passed the Okum's law and in most of the current texts, inequality has been considered as a deterrent to economic growth.

To be sure, "inequality" is too simplistic and reductive a concept to lead to stable cross-sectional relationships with national economic growth. The source of inequality clearly ought to matters(rent-seeking by the wealthy vs. productivity differences). In addition, the role of envy in individual well-being (consumption of status goods where ranking matters) needs more investigation. Rodrik's point about dynamic development patterns generating inequality during certain stages is certainly relevant. Finally, technological change may play an important part in understanding comparisons of the significance of inequality over time. For instance, it may be that technological improvements have flattened the relationship between wealth and happiness, reducing the marginal contribution of additional wealth. Hence "happiness" distribution could grow more equal over time even as wealth grows less equal. (That is, the importance of relatively "cheap" goods in our lives, such as basic automobile services, internet services, etc., regardless of wealth has this leavening effect.) These issues are plainly complex and belie all the efforts at easy (i.e., simplistic) answers and universal truths.

I beg to differ regarding Bolivia's statement... we are undoubtedly following the same path as Venezuela and ALBA members regarding redistributive transfers. Bolivian ochlocracy in government has failed to administer/invest over $120 billion dollars over the last nine years. There is no impartial justice, as all state powers subdue to the executive branch. Illegal land and mine concession take overs, community justice resulting in lynching and prevent investment. Also booming narcotrafficking and smuggling activities have created an anarchical environment, despite a few unsustainable bonuses that are handed out of demagogue and now that the oil prices and most of our commodity exports are suffering a decrease, current coca-grower government has no clue to face those issues.

WHERE ARE THE AMERICAN ECONOMISTS?
Beyond concerns about fairness there are other and quite cogent reasons for concern about extremes of wealth distribution. An article by Piketty and Saez in 2003 in the Quarterly J. Economics, updated in 2012, showed inequality in the U.S. equalling that in 1928. Shouldn't "we", i.e. Americane conomists be taking a harder look at such relationships? The book by Thomas Piketty invokes
a Matthew effect that systematically enhances top income brackets: "To him that hath shall be given; from him that hath not shall be taken even that which he hath".

Many of the outlays either go abroad or simply foster enterprises mainly focused on the rich. From this one might conclude that the wealth of super rich his a relatively low yield in terms of wealth building or broad economic effects.

Now what about the incentive benefits of huge incomes in terms of leadership of major companies or other entities. My talks with people who have contacts among high executives or earners essentially degree that just having more money to spend is not the primary motivation for seeking high personal rewards. A more important reason is that remuneration has become a symbol of achievement and respect.

And here's where another grossly underestimated or reported relationship comes in. Plot income quintile data from 1950 to the most recent data with a log axis for income (data from Census Bureau or Bureau of Labor Statistics) and you'll see a remarkably sharp change of slope at 1970. Before 1970 the lower quintiles experienced greater proportional increases; after 1970 the reverse took place. In a book in 2009 I traced this change to a national environmental crisis in 1969, which set off draconian new Congressional laws beginning with the NEPA Act and Clean Air Act amendments of 1970. These were primarily directed at manufacturing and industry because these were regarded as the main threats to environmental values. It has been estimated by respected social scientists that most of the investment capital of the nation was applied to increased environmental costs and investments during the decade of the 1970s. The costs, vastly increased regulatory burdens, and increased legal and political risks caused a flight of business leaders and capital from manufacturing to less affected sectors like real estate, banking and finance, imports and marketing. Instead of their former identification with an industry and company and taking pride in products, a new generation of more mobile business leaders sought sought recognition for achievements in terms of corporate profits that became reflected in executive compensation. The U.S. lost many of the industries and products that it founded or led in, whereas leading European nations lost almost none of their traditional industries.

John Shannon . Great ideas you have there .You have accurately curated How China has grown in thelast 30 years not byany miracle but by lifting the a substantialm portion of the bottom third to to the middle income status >This i would compare in my rudimentary grasp of science is like heating a solid to turn it to another state be it liquid or gas only dependent on varying temparatures .This China has done by improving public infrastructure and very importantly Education.Whatv education provides is notas many people including economists seem to think....a higher wage and a better livelyhood Indeed not What education provides is ameasure of Flexibility .In his book The black swan Nassim Nicholas Taleb Suggests that what went wrong in the economy is not that we had a recession. but that the recession proved that we were fragile. Going back on education it provides persons with the flexibility to ride through cris and arguably that is why America and Northern Europe have recovered from the recession much faster because of the Prescence ogf a skilled workforce that can esily be tapped into.The answer to inequality is to simply democratise the access to education and skill .However more education will not give you those 10% bursts of growth rates politicians so crave it is aslow burnig fuel that will consistently act as a bufer in case of recessions .The recessio however only increased the fragility of the American Education system meaning that those who were in a position to pay school fees to say bottom tier tertiary education cannot afford education and thus have to rely on ever dwindling scholarships It is a bold statement maybe borne out of Folly and Naivety but Educaracy will be important if we are ever to gain growh substantially

"Moreover, redistributive policies did not appear to have any detrimental effects on economic performance. We can have our cake, it seems, and eat it, too."

Peter Lindert showed that in his book, Growing Public (2004). Thomas Sargent's recent reassertion of Okun's tradeoff between equality and effeciency suggests that in the discipline of economics ideology too often trumps facts. Most economists, it seems, cherish incentives for owners of capital not labor.

Okun's book was required reading in the late 70s when I was in grad school. Even then it was understood that this was not a trade off of absolutes, but rather one of achieving the right balance. The concept of appropriate balance and that the balance would need regular adjustment to match changes in other variables seems to have been lost, especially so on many American politicians and media pundits.

There may be a tension between equality and efficiency, but the worst problems seem to arise when incentives to work and innovate are put in competition with incentives to save and invest, as they are by tax codes that burden earned income and spare unearned income such as dividends and capital gains. In those cases you get greater inequality and less efficiency. Normally, this disparity in treatment is defended as a pragmatic adjustment to a world of mobile capital, but it would not be hard to incorporate the trade in capital assets within world trade agreements and to define and outlaw predatory practices within that trade. That would largely remove the subsidies and other tools that governments use to attract capital that would otherwise go elsewhere. Perhaps we should start there with efforts to improve both equity and efficiency, before being sidetracked into efforts to make trade-offs between them.

Allow me to take some liberties to make my point (otherwise this comment will end up being 3000 words long) and I will convince you (hopefully) that the people who game national economies, attribute good economic conditions to many things -- but not necessarily the right things.

Let's look at household income. And let's say that there is a 'bottom third' a 'middle third' and a 'top third' of household employment income (or total wealth). Either measure works.

I'm not saying that there is necessarily three distinct 'thirds' of households, but let's say there is. We can work it back from there.

So, the top third only need one Bentley, one Lear Jet, and one monster-sized home in their own country. Of course, they require all the accoutrements to go with that. But really, how long does that take? And how many accoutrements can one purchase before one runs out of space and can't stand the clutter anymore?

These people are initially large spenders, but with a huge and almost lifelong plateau in their spending pattern.

The middle third pushes bravely along through all of life's stages (university student, young married, young family, rising through the corporate world, generally rising income, the plateau, and finally, retirement). Through it all, but especially at the beginning, they are improving their lives by boosting the economy. If only all people in a society fell into this category, growth would be in the low double digits eternally.

The bottom third also pushes along bravely and through different stages (perhaps no university education for them, as the can't afford it) they may, or may not get married or have a family, or if they do, extreme poverty can break all of that. Look at those stats! (I rest my case) Not only that, the lowest third is also much more likely to cost the taxpayer/society a lot of money. Not always, but generally.

Policing costs, cost of crime to society, healthcare costs/issues, employment issues are common and long periods of unemployment can happen. These people are lucky if they're considered 'the working poor' as opposed to the 'unemployed poor'. By far, these are the most costly people to a society.

Yet it's not their fault that all the jobs have been shipped to Asia -- so our iPhones cost us 10% less than if they were manufactured here.

Empowering these people with money, thereby bringing them into the 'middle third' status, would save nations billions of dollars -- not cost billions of dollars.

Back in the 1960's when having a job meant owning a home, owning a car, and most likely a university education, the bottom third didn't exist. It may have been the bottom 20th that existed in the state of today's bottom third.

Income was relative to home ownership, to car ownership and a decent life. Nowadays, it's simply not possible to live in the bottom third. Yet, people do live it, but the cost to themselves, to society, to others that they come into contact with -- eats up much of the forward progress that the middle third gives the economy.

A high minimum wage law (a living wage) could take care of much of this within 10 years. Or, redistribution of wealth via taxation transfers could work, but that de-incentivizes the top 2/3rds of society. Risky.

The other way (and this should be a given, living wage or not) is to lower taxation to zero, for those households that earn less than $50,000 per year. They don't pay much tax anyway, it's not like the governments are going to lose much in that case.

Instead of that relatively small amount of taxation going to governments, it will be endlessly recycled throughout the local economy, giving a mini-boost wherever it goes.

To recap; For Western economies to perform better we need to bring the bottom third, into middle third territory, thereby increasing money flows throughout local economies, lowering crime/policing costs, lowering drug/psychological problems and other costs to society.

We do this by:
1) lowering income taxes to zero for under $50,000./yr households
2) increasing minimum wages to living wages
3) topping the programme off with taxation transfers to the bottom third
until, by employing a combination of these three modalities, the bottom third no longer exists.

The increase in spending by the doubled in size middle third class, (then becoming a unified 2/3rds of the economy) the higher education levels, the lower crimg/policing/incarceration/heathcare costs (and so much more) will radically improve Western economies and add real value to the lives of 1/3 of the population -- at the very least.

See also:

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Sooner or later, Trump's core supporters will wake up to this fact, so it is worth asking how far he might go to keep them on his side.

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